For Borrowers in Trouble: Partial Payments (2024)

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§1. What happens with partialpayments

Full mortgage payments usually must be credited to the borrower’s account on the day they’re received. But borrowers in trouble often try to make a partialpayment, and there haven’t been rules for what happens then. Some lenders won’t accept partialpayments at all. Some hold onto them in special accounts (“suspenseaccounts,” sometimes called “unapplied funds accounts”) rather than crediting them immediately to the borrower’s loan. Some lenders don’t credit partialpayments in the way that helps borrowers the most. This has been very confusing to borrowers, and sometimes makes the situation of a borrower in trouble worse. CFPB is proposing to change part of this: what happens with suspenseaccounts. It’s also proposing that partialpayment information be highlighted on the periodicstatement borrowers must get every payment cycle. (See the Periodic Statements post.)

What this means for consumers and servicers. Under CFPB’s proposal, lenders could still refuse to accept partialpayments. But, if the lender accepts partialpayments and puts them in a suspenseaccount, it must:

1. credit this money as a payment as soon as there’s enough money in the suspenseaccount to make up a full payment; and
2. apply this credit to the oldest missed payment so that overdue charges don’t continue to pile up for that payment

Is this a good approach to the partialpayment issue?

Also lenders must make special disclosures about suspenseaccounts on the periodicstatement they have to send in each billing cycle (look in the Past Payments Breakdown box):

Periodic Statement Sample 2

Will this be clear to borrowers? CFPB is not planning to require that a servicer who refuses to accept partialpayments and returns them to the borrower must include this information on the periodicstatement. Should this information be included? The Message section must include information on what the borrower must do to get the funds out of the suspenseaccount.

An important question is what “full payment” means. CFPB proposes that a full payment covers (1) interest, (2) principal, and (3) escrow but not any late fees that are due. However, it specifically wants comments on whether it should let lenders include late fees in determining whether the borrower has made a full payment for purposes of accepting, or crediting, the payment.

Read what CFPB says in the NPRM about partialpayments.

Read CFPB’s analysis of partialpayment costs and benefits: general; small business.

See the text of the proposed rule: § 1026.36(c)(1)(iii)